Sixteen banks being sued for rate-rigging
(19 August 2016 – Global) Up to sixteen banks have been named in a suit filed by funds in the US for allegedly manipulating a key Australian interest rate benchmark to generate hundreds of millions of dollars in illicit profits.
Included in the suit are JPMorgan, Morgan Stanley, BNP Paribas, Deutsche Bank, Royal Bank of Scotland (RBS), HSBC, UBS, Citigroup, and Credit Suisse as well as Australia’s biggest banks: National Australia Bank (NAB), Commonwealth Bank of Australia (CBA), ANZ Bank, Westpac and Macquarie Group.
The class action, filed in the US District Court, claims the banks sought to fix the bank bill swap rate which is used to price billions of dollars of floating-rate bonds and syndicated loans. It cites a civil action launched earlier this year by Australia’s securities regulator against ANZ, NAB and Westpac.
“Defendants generated hundreds of millions of dollars in illicit profits by artificially fixing BBSW-based derivatives prices at levels that benefited their trading books,” according to the complaint, which is seeking a court order to force the banks to “disgorge their ill-gotten gains.”
The action is being brought by New York-based investment fund Sonterra Capital Master Fund Ltd., various FrontPoint Financial funds and Florida-based derivatives trader Richard Dennis, according to the filing.
“ASIC’s ongoing investigation has already uncovered communications in which defendants openly conspire to fix BBSW and the prices of BBSW-based derivatives,” the document filed 16 August 2016 said. “Plaintiffs have good reason to believe and do allege that the limited, public materials available to date are only the tip of the iceberg.”
In separate statements Westpac and ANZ Bank both said that they will “vigorously” defend the complaint, while NAB reiterated that it didn’t agree with claims made by ASIC. Another defendant, Lloyds Banking Group Plc, said the case was without merit and would be vigorously opposed.
The US action asserts that trillions of dollars of BBSW-based derivatives traded over the counter and on public exchanges in the U.S. during the “class period,” which wasn’t defined in the document.
According to the claim, Sonterra Capital engaged in dozens of Australian dollar foreign exchange swaps and forwards worth more than A$645 million with Morgan Stanley at “artificial prices proximately caused by Defendants’ manipulative conduct.”
FrontPoint collectively traded more than A$100 million in BBSW-based swaps with Macquarie, according to the claim.
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